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Printing money for state spending - comparative histories

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What with Jeremy Corbyn proposing "quantitative easing for people instead of banks", ( "one option would be for the Bank of England to be given a new mandate to upgrade our economy to invest in new large scale housing, energy, transport and digital projects") what has the history of print and build been like across the world?

Danger of inflation must be the biggest concern....

Theres a little thing here from Robert Preston as to why even moderate use of this approach can have an inflationary impact
http://www.bbc.co.uk/news/business-33884836
responded to here by Richard Murphy who is pro the policy
http://www.taxresearch.org.uk/Blog/2015/08/12/robert-peston-on-peoples-qe/

Prestons conculsion is that "quantitative easing for people makes good economic sense only if you believe that a state investment bank would make viable investments that the private sector refuses to make."
 
I'd guess the Marshall Plan money was all printed for purpose and that'd be your biggest example, rebuilding Europe after ww2. Then also the New Deal (again no idea how it was actually funded) and various similar programs around Europe in the great depression.

Preston is wrong though. If the state can make a better investment that the public sector, then it makes sense for the state to make that investment, even if the private sector would do it. Housing is a good example of this - 40yr repayment periods at lower interest rates with no sales bumping the debt back up along the way = cheaper housing, especially in the long run when the debt is fully paid off.
 
I think China has been doing all its massive infrastructure projects (including those mad ghost towns) by printing the cash for it...and thats on a serious scale...

But I also wonder about more modest projects within recent years within the the EU?
 
Not sure there are any, hasn't all the EU/UK money printing been for QE which has gone into the banking system as cash? What infrastructure investments there have been in the UK have been from taxation/govt borrowing, I don't know if that's the same for the eu or not but everyone's on the same austerity/neo-liberal track so I'd guess it is.
 
BigTom said:
It's possible it was funded out of taxation or borrowing, I don't know and cba to try and find out, it was a very large amount though, so I'd guess it was printed for purpose.
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Partly from remaining principal monies from War Bonds, partly from borrowings secured on Lend/Lease repayments, and partly from general taxation.
 
Corbyn would be sensible to look at funding public works through bond issues. The City don't like it because they can't make big profits like they can through PFI, and the big consultancies hate it because...what's to be consulted about? Bond issues are relatively simple - fixed term investment with a fixed yield.
 
Argonia said:
Alas, if printing money led to prosperity so easily, there wouldn't be a long history of hyper-inflations as a result of printing.
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Controlled creation of new money isn't risky - hundreds of billions of pounds of QE to banks has caused barely a ripple to headline inflation rates in the UK. It's uncontrolled creation that's a worry, and that only happens when a state has no other access to liquidity. The UK, it should be remembered, has a triple A credit rating, even though Osborne managed to fumble it and drop the ball for a while.
 
ViolentPanda said:
Controlled creation of new money isn't risky - hundreds of billions of pounds of QE to banks has caused barely a ripple to headline inflation rates in the UK. It's uncontrolled creation that's a worry, and that only happens when a state has no other access to liquidity. The UK, it should be remembered, has a triple A credit rating, even though Osborne managed to fumble it and drop the ball for a while.
Click to expand...

It also depends on what the wider economy is like. If you print money and use it in such a way as to grow the economy, then the new larger economy needs more cash in it to function, which mitigates against any inflationary effect. Given the hefty amount of unemployment, there's definitely space for our economy to grow.
 
ViolentPanda said:
Corbyn would be sensible to look at funding public works through bond issues. The City don't like it because they can't make big profits like they can through PFI, and the big consultancies hate it because...what's to be consulted about? Bond issues are relatively simple - fixed term investment with a fixed yield.
Click to expand...

New York Subway was totally renovated through public bonds. Livingstone toted this for London before ending up with (or agreeing to?) PFI deal. Bond issues can work very well for big infrastructure.

It's not as if NYC is the most Marxist city in the world is it?
 
NYC still following this policy 25+ years on.

Mayor Michael Bloomberg's December 12, 2006, address to the New York League of Conservation Voters noted that in November 2006, the government began issuing bonds to fund the extension of the 7 subway to Eleventh Avenue and 34th Street.[23] The $2 Billion 7 train subway extension is being funded with New York City funds from municipal Tax Increment Financing (TIF) bond sales that are expected to be repaid with property tax revenues from future developments in areas served by the extension.[24]
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https://en.wikipedia.org/wiki/7_Subway_Extension
 
One of the criticisms of QE at the time it was first implemented was that very little of the money filtered down to the real economy thus its impact was limited. I've often thought that if the objectives was to get more money circulating in the economy to stimulate growth then another measure asides from corbyns proposal would have been to give the poorest sections of society an occasional bumper giro.. This would be due to the fact that lower income people have higher marginal propensity to consume in other words people with a hand to mouth existense don't have the luxury of being able to save..hey presto the extra consumer spending would stimulate growth...

Obviously such a measure would be politically unacceptable in today's climate plus vis a vis QE for developing fixed capital formulation through public investment it would be piss poor for capital expansion possibilities... Nevertheless always quite liked the idea of spending a phat giro say taking my kids to Alton towers as doing my bit for the national economy :D
 
Money creation for the purpose of direct consumption probably would be inflationary though. The key to avoiding inflation, as BigTom mentioned above, is to grow the economy such that there is an increased amount of stuff for the new money to be spent on.
 
ViolentPanda said:
Controlled creation of new money isn't risky - hundreds of billions of pounds of QE to banks has caused barely a ripple to headline inflation rates in the UK. It's uncontrolled creation that's a worry, and that only happens when a state has no other access to liquidity. The UK, it should be remembered, has a triple A credit rating, even though Osborne managed to fumble it and drop the ball for a while.
Click to expand...
There's a couple of key reasons for that, at the same time as QE the banks were being required to increase their cash reserves ratios, so they basically sat on most of the new cash once it landed in their accounts, rather than that extra cash multiplying out into the economy by the banks lending many multiples of the actual additional cash. Also IIRC it occurred at the same time as a slow down in the velocity of circulation of money, as Osbourne talked down the economy via Austerity, as well as the direct impact of austerity itself.

Also it probably did contribute to inflation spiking around 5%, so not runaway inflation, but still more than double the BoE target.

I could see serious dangers with Corbyn's approach that none of those factors would apply / they'd apply in reverse and multiply up the inflationary impact. Still doable at relatively low levels, particularly when inflation's currently at 0%.
 
BigTom said:
I'd guess the Marshall Plan money was all printed for purpose and that'd be your biggest example, rebuilding Europe after ww2. Then also the New Deal (again no idea how it was actually funded) and various similar programs around Europe in the great depression.

Preston is wrong though. If the state can make a better investment that the public sector, then it makes sense for the state to make that investment, even if the private sector would do it. Housing is a good example of this - 40yr repayment periods at lower interest rates with no sales bumping the debt back up along the way = cheaper housing, especially in the long run when the debt is fully paid off.
Click to expand...

Pretty sure that the Marshall Plan came out of the USA's budget, not quantitative easing.

Wasn't that the point of it?

It was a sort of tied aid, which is why the Soviets and their pals rejected it...
 
ViolentPanda said:
Corbyn would be sensible to look at funding public works through bond issues. The City don't like it because they can't make big profits like they can through PFI, and the big consultancies hate it because...what's to be consulted about? Bond issues are relatively simple - fixed term investment with a fixed yield.
Click to expand...

The markets and the rating agencies might value UK government gilts in a slightly different light if you have a PM come in with the sort of policies that Corbyn favours...
 
Diamond said:
The markets and the rating agencies might value UK government gilts in a slightly different light if you have a PM come in with the sort of policies that Corbyn favours...
Click to expand...

The markets are instrumentalist. They'll view them in whichever way best benefits them.
 
Diamond said:
The markets and the rating agencies might value UK government gilts in a slightly different light if you have a PM come in with the sort of policies that Corbyn favours...
Click to expand...

What ratings agencies say, and what actually happens to the economy in reality, are two entirely different things. Do these agencies have any credibility after their abysmal performance in foreseeing the credit crunch? These are the people that gave treble-A ratings to the most toxic financial instruments out there. We place too much faith in these charlatans.
 
cynicaleconomy said:
What ratings agencies say, and what actually happens to the economy in reality, are two entirely different things. Do these agencies have any credibility after their abysmal performance in foreseeing the credit crunch? These are the people that gave treble-A ratings to the most toxic financial instruments out there. We place too much faith in these charlatans.
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Try issuing paper on a treble-A rating and then on a junk rating - you will find that they are two rather different things.
 
Diamond said:
So are we to understand that the markets are a unified bloc?
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No, "we're" to understand (Royal we, or are you purporting to speak for people other than yourself?) that in late capitalism, profitable behaviours with regard to securities will tend to be similar, and similarly instrumental.
 
ViolentPanda said:
No, "we're" to understand (Royal we, or are you purporting to speak for people other than yourself?) that in late capitalism, profitable behaviours with regard to securities will tend to be similar, and similarly instrumental.
Click to expand...

Right - this is nonsense on a lot of levels.

"profitable behaviours" - what are "unprofitable behaviours"?
 
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